A. Bitcoin is a peer-to-peer digital currency. Peer-to-peer (P2P) means that there is no central authority to issue new money or keep track of transactions. Instead, these tasks are managed collectively by the nodes of the network.

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'''Q. How does Bitcoin work?'''

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A. Bitcoin utilizes public/private key digital signatures (ECDSA). A coin has its owner's public key on it. When a coin is transferred from user A to user B, A adds B’s public key to the coin and signs it with his own private key. Now B owns the coin and can transfer it further. To prevent A from transferring the already used coin to another user C, a public list of all the previous transactions is collectively maintained by the network of Bitcoin nodes, and before each transaction the coin’s unusedness will be checked.

Revision as of 20:14, 16 December 2010

Q. What is Bitcoin?

A. Bitcoin is a peer-to-peer digital currency. Peer-to-peer (P2P) means that there is no central authority to issue new money or keep track of transactions. Instead, these tasks are managed collectively by the nodes of the network.

Q. How does Bitcoin work?

A. Bitcoin utilizes public/private key digital signatures (ECDSA). A coin has its owner's public key on it. When a coin is transferred from user A to user B, A adds B’s public key to the coin and signs it with his own private key. Now B owns the coin and can transfer it further. To prevent A from transferring the already used coin to another user C, a public list of all the previous transactions is collectively maintained by the network of Bitcoin nodes, and before each transaction the coin’s unusedness will be checked.